Market-Adjusted Cost Approach Method

Market-Adjusted cost approach is the premise that a certain quality of property has a base value of X dollars per square foot, with added factors for every additional amenity. A final market adjustment is applied to each neighborhood, positive or negative, to bring the neighborhood to "market value." The fundamental weakness is that the cost approach does not reflect the supply-and-demand relationship in the marketplace because the market adjustment factor is applied to every amenity, whether it is reflected in the market or not.